Hapag Lloyd India Pvt. Ltd v. Principal Commissioner Of Income-Tax, Mumbai – 5 & Anr

SANTOSHSUBHASHKULKARNI Digitally signed bySANTOSHSUBHASHKULKARNIDate: 2022.02.1018:29:22 +0530 IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO. 2322 OF 2021 Hapag Lloyd India Pvt. Ltd....Petitioner Versus Principal Commissioner of Income-Tax, Mumbai – 5 & anr....Respondents Mr. Nishant Thakkar, a/w Mr. Hiten Chande, i/b PDS Legal,for the Petitioner. Mr. Sham Walve, for Respondents – Revenue. CORAM:K. R. SHRIRAM &N. J. JAMADAR, JJDATED:9[th] FEBRUARY, 2022(Video Conferencing) JUDGMENT: (PER : N. J. JAMADAR, J.) 1.Rule. Rule made returnable forthwith, and with theconsent of the Counsels for the parties, heard finally. 2.The challenge in this petition is to an order dated 31[st]March, 2021, passed by the Principal Commissioner, IncomeTax, (“PCIT”), Mumbai, respondent no.1, in Revision ApplicationNo.PCIT, Mumbai-5/Revision-264/100000104019/2021, underSection 264 of the Income Tax Act, 1961 (“the Act, 1961”),whereby respondent no.1 was persuaded to reject the revisionapplication on the ground that it was not maintainable underSection 264 of the Act, 1961. 3.The facts necessary for the determination of this petitionare as under: (a)The petitioner is a private limited company. It issuccessor of United Arab Shipping Agency India Company Pvt.Limited (“UASAC”), which amalgamated with the petitioner witheffect from 1[st] April, 2019, pursuant an order by NationalCompany Law Tribunal. The UASAC, the predecessor company,had distributed dividend of Rs.10,16,75,641/- to its holdingcompany, United Arab Shipping Company Limited, a companyincorporated under the laws of Kuwait. The UASAC paidDividend Distributed Tax (“DDT”) at the rate of 16.91%(including surcharge and cess) aggregating to Rs.2,06,99,127/-.A return of income for Assessment Year 2016 – 2017 was filed byUASAC on 30[th] November, 2016. A revised return of income wasfiled on 23[rd] December, 2016. (b)In the original as well as revised return, the benefit ofArticle 10 of India – Kuwait DTAA was, however, not claimed.Under the said article, the dividend distributed during theFinancial Year 2015 – 2016, was taxable at the rate of 10%. Thepetitioner was, thus, entitled to refund of Rs.84,61,650/- beingthe excess tax paid. The petitioner thus preferred an applicationunder Section 264 of the Act before respondent no.1. (c)By the impugned order respondent no.1 waspersuaded to reject the application as untenable primarily onthe ground that the UASAC had not made a claim of return ofexcess DDT at the time of filing original return of income as wellas the revised return of income. Consequently, the assessmentorder under Section 143(3) of the Act, 1961 was passed on 18[th]December, 2018. Thus, there was no apparent error on therecord in the said Assessment Order which warranted exercise ofjurisdiction under Section 264 of the Act, 1961. 4.The petitioner has invoked the writ jurisdiction on theground that respondent no.1 has completely misconstrued thescope of jurisdiction under Section 264 of the Act, 1961. Thisincorrect approach of respondent no.1 has resulted inunjustified refusal to exercise the jurisdiction vested in him bySection 264 of the Act, 1961. Thus, the impugned order be setaside and the matter be remitted back to respondent no.1 fordetermination on merits. 5.An affidavit-in-reply is filed on behalf of respondent no.1,wherein an endeavour has been made to support the impugnedorder. It is, inter alia, contended that the Assessment Orderpassed by the Assessing Officer under Section 143(3) of the Act,1961, cannot be said to be against the interest of the assessee and, therefore, respondent no.1 was justified in declining toexercise the jurisdiction under Section 264 of the Act, 1961. 5.An affidavit-in-reply is filed on behalf of respondent no.1,wherein an endeavour has been made to support the impugnedorder. It is, inter alia, contended that the Assessment Orderpassed by the Assessing Officer under Section 143(3) of the Act,1961, cannot be said to be against the interest of the assessee and, therefore, respondent no.1 was justified in declining toexercise the jurisdiction under Section 264 of the Act, 1961. 6.In the backdrop of the limited nature of the controversy,which revolves around the scope of jurisdiction under Section264 of the Act, 1961, as construed by respondent no.1, we haveheard Mr. Thakkar, the learned Counsel for the petitioner andMr. Walve, the learned Counsel for respondent no.1. 7.Mr. Thakkar, the learned Counsel for the petitionersubmitted that respondent no.1 committed a grave error in lawin holding that an application under Section 264 of the Act,1961 was not maintainable when the assessee had not made aclaim for refund of excess tax paid, in the original return.Mr. Thakkar would urge that the view of respondent no.1 that,for exercise of jurisdiction under Section 264 of the Act, 1961,the order impugned ought to be apparently erroneous, iscompletely misconceived. Under Section 264 of the Act, 1961,the Commssioner is empowered to call for the record of anyproceeding and make inquiry or cause an inquiry to be madeand thereafter pass such order, as he thinks fit, but not beingthe one prejudicial to assessee. The scope is thus not restrictedto correction of error apparent on the face of record, urged Mr.Thakkar. 8.In opposition to this, Mr. Walve sought to justify theimpugned order on the premise that the refund was not claimedin the original as well as revised return and thus the orderpassed under Section 143(3) by the Assessing Officer, which wassought to be revised cannot be said to be prejudicial to assesseeand, therefore, respondent no.1 was well within his rights inrefusing to exercise the revisional jurisdiction. 9.In order to properly appreciate the aforesaid submissions,it may be apposite to extract the relevant part of the reasonsascribed by respondent no.1 in the impugned order. Paragraph 6 reads as under: “6.I have perused the relevant material availableon record. I find that the assessee had not made thesaid claim of refund of excess DDT at the time of filingof return of income i.e. on 30.11.2016. If the assesseecompany had realized that the said claim of refund ofexcess DDT remained to be claimed, this claim shouldhave been made while filing revised return of incomeon 23.12.2016. The assessee company has failed toclaim the said claim of refund of excess DDT duringthe course of assessment proceedings also.Subsequently, the assessment order u/s 143(3) waspassed on 18.12.2018 accepting the returned incomeof the assessee. As such there is no mistake in theorder u/s 143(3) of the act. The section 264 has beendevised to review the order which is erroneous on theadmitted facts of the case. Therefore, as discussed inforegoing paragraphs, in my view the revision for theassessment year under consideration is notmaintainable and I do not consider it a ft case for-invoking the powers under section 264 of the Incometax Act, 1961. Thus, in view of the facts of the case,the reasons mentioned above, on the applicationunder section 264 of the Income-tax Act, 1961. Thus,in view of the facts of the case, the reasons mentionedabove, on the application under section 264 of theIncome-tax Act, 1961 filed by the assessee company, I DECLINE TO INVOKE THE PROVISIONS OF SECTION 264of the Income-tax Act, 1961 for the A.Y. 2016-2017. Thus, the application filed by the assessee u/s264 of the IT Act, 1961 is hereby rejected.” (emphasis supplied) DECLINE TO INVOKE THE PROVISIONS OF SECTION 264of the Income-tax Act, 1961 for the A.Y. 2016-2017. Thus, the application filed by the assessee u/s264 of the IT Act, 1961 is hereby rejected.” (emphasis supplied) 10.From the perusal of the aforesaid reasons, it becomesevident that two factors weighed with respondent no.1. First, theassessee had not claimed refund in the original and revisedreturn and, thus, there was no error in the assessment orderpassed under Section 143(3) on 18[th] December, 2018. Second,respondent no.1 was of the view that the jurisdiction underSection 264 was confined to correct the order which is found tobe apparently erroneous. 11.Respondent no.1 was justified in recording that theassessee had not claimed refund of excess tax paid by it in theoriginal and revised return. However, respondent no.1committed an error in constricting the scope of revisionaljurisdiction, in the backdrop of the said undisputed factualposition. In fact, the very foundation of the application underSection 264 of the Act, 1961 was that the assessee hadinadvertently failed to claim the benefit of Article 10 of the India– Kuwait DTAA, under which the dividend distribution was taxedat a lower rate. We are of the view that the approach ofrespondent no.1 in refusing to exercise the jurisdiction under Section 264 of the Act, 1961 on the premise that it can belawfully exercised only where such a refund was claimed andconsidered by the Assessing Officer is neither borne out by thetext of Section 264 of the Act, 1961 nor the construction putthereon by the precedents. 12.The aforesaid reasoning indicates that respondent no.1failed to appreciate the distinction between revisional and reviewjurisdiction. The principles which govern the exercise of reviewwere sought to be unjustifiably imported to the exercise of powerunder Section 264 of the Act, 1961 and thereby imposinglimitations which do not exist on exercise of such power.Undoubtedly, revisional jurisdiction is not as wide as anappellate jurisdiction. At the same time, revisional jurisdictioncannot be confused with the power of review, which by its verynature is limited. 13.Mr. Thakkar was justified in placing reliance on a DivisionBench Judgment of this Court in the case of Geekay SecurityServices (P) Ltd. vs. Deputy Commissioner of Income Tax, Circle-3(1)(2)[1]wherein the Division Bench considered an identicalquestion as to whether the revisional authority was justified inrejecting the revision application solely on the ground that theapplicant had not claimed the benefit in the original return.1[2019} 101 taxmann.com 192 (Bombay). After adverting to the previous pronouncements of various HighCourts, this concurred with the view that Section 264 does notlimit the power to correct errors committed by the sub-ordinateauthorities and could even be exercised where errors arecommitted by the assessee and there is nothing in Section 264which places any restriction on the Commissioner’s revisionalpower to give relief to the assessee in a case where assesseedetects mistakes after the assessment is completed. 14.The aforesaid pronouncement is on all four with the factsof the case at hand. 15.We are, therefore, inclined to interfere with the impugnedorder. Since respondent no.1 has not considered the revisionapplication on merits, it would be in the fitness of things toremit the application back to respondent no.1 for de novoconsideration on merits. Needless to add that respondent no.1shall give an effective opportunity of hearing to thepetitioner/assessee with adequate advance notice. 16.Hence the following order: : O r d e r : (i)The petition stands allowed. (ii)The impugned order dated 31[st] March, 2021 standsquashed and set aside. quashed and set aside. 14.The aforesaid pronouncement is on all four with the factsof the case at hand. 15.We are, therefore, inclined to interfere with the impugnedorder. Since respondent no.1 has not considered the revisionapplication on merits, it would be in the fitness of things toremit the application back to respondent no.1 for de novoconsideration on merits. Needless to add that respondent no.1shall give an effective opportunity of hearing to thepetitioner/assessee with adequate advance notice. 16.Hence the following order: : O r d e r : (i)The petition stands allowed. (ii)The impugned order dated 31[st] March, 2021 standsquashed and set aside. quashed and set aside. (iii)The revision application stands restored to the file ofrespondent no.1 and remitted back for de novoconsideration. respondent no.1 and remitted back for de novoconsideration. (iv)Respondent no.1 shall provide an effectiveopportunity of hearing to the petitioner/assesseewith an adequate advance notice and decide therevision application in accordance with law asexpeditiously as possible and, preferably, within aperiod of 12 weeks from the communication of thisorder. opportunity of hearing to the petitioner/assesseewith an adequate advance notice and decide therevision application in accordance with law asexpeditiously as possible and, preferably, within aperiod of 12 weeks from the communication of thisorder. (v)By way of abundant caution, we clarify that we havenot entered into the merits of the matter and allquestions are expressly kept open for considerationby respondent no.1, except the question of tenabilityof the revision application. not entered into the merits of the matter and allquestions are expressly kept open for considerationby respondent no.1, except the question of tenabilityof the revision application. (vi)All concerned to act on an authenticated copy of thisorder. order. Rule made absolute. No costs. [N. J. JAMADAR, J.] [K. R. SHRIRAM, J.]